Taxation and market power in the legal marijuana industry

Abstract

In 2012 the state of Washington created a legal framework for production and retail sales of marijuana. Ten other U.S. states and Canada have followed. These states hope to generate tax revenue for their state budgets while limiting harms associated with marijuana sales and consumption. We use a unique administrative dataset containing all transactions in the history of the industry in Washington to evaluate the effectiveness of different tax and regulatory policies under consideration by policymakers and study the role of imperfect competition in determining these results. We use both a reduced form sufficient statistic approach and structural methods to show a number of results. First, Washington's strict cap on firm entry has resulted in retailers with substantial market power. This market power has immediate consequences for both state tax revenue and consumer welfare. Second, because these entry restrictions have caused retailers to behave like local monopolists, the state could substantially increase revenue generated from marijuana legalization by acting as the retailer itself, as it did for alcohol sales until 2012, without a large increase in prices. Third, despite having the nation's highest tax rate at 37%, marijuana in Washington is not overtaxed as many policymakers in other states have argued. The high taxes do not result in lower revenue or a substantial black market. Instead Washington is still on the upward sloping portion of the Laffer curve and the amount of revenue generated by a tax increase is significantly larger due to retailer market power than it would be under perfect competition. Our results suggest there is not widely available black market marijuana competing with legal retail sales. Finally, the high excise tax is primarily borne by consumers and not by firms, and there is a large social cost associated with each dollar raised.

Hemp Genotype Selection Coefficient to Improve Human Welfare Development

“…It has been possible to find a coefficient for selecting hemp genetic material that provides maximum human welfare [5][6][7][8]. The K coefficient is related to the dimensions of legality, protection, and promotion of human health based on industrial hemp [9][10][11][12][13][14][15][16][17][18][19][84][85][86] and contributes to improving human wellbeing. This is how the K coefficient is linked to TCBD, CBG, CBN and TTHC .…”

“…Even less new are the concepts of genetic selection of plants to generate human welfare [9][10][11][12]. For its part, the hemp industry requires compliance with the legal regulations imposed by each country so that this productive activity is carried out with good manufacturing practices [13][14][15][16][17][18][19]. In addition, the human brain has an endocannabinoid system that develops the nervous system and activity in the brain, which is useful for new therapies as it is interrelated with treatment status, disease progression, and severity of symptoms.…”

Trends in cannabis use intention around the period of cannabis legalisation in Australia: An age‐period‐cohort model

“…When cannabis use becomes fully legalised, a for‐profit cannabis industry will have a commercial interest in expanding the number of daily consumers [ 34 ]. The profitability of the enormous cannabis markets will give the industry sufficient resources to resist public health regulations, which seems to be happening with the legal cannabis industry in the US [ 34 , 35 ].…”

Electronic prescription monitoring and the opioid epidemic

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